Business-Led Group Urges Comprehensive Reform, End to Employer
Insurance System

WASHINGTON, Oct. 15 /PRNewswire-USNewswire/ -- Health care costs
threaten future U.S. economic growth. Today's employer-based system is
faltering and should be replaced by an insurance system driven by
cost-conscious consumer choice. Those are the central findings of Quality,
Affordable Health Care for All: Moving Beyond the Employer-Based
Health-Insurance System, released today by the business-led Committee for
Economic Development (CED).

"Employer insurance is failing because of rapid cost increases and the
inability to provide high-value care. CED's report explains that quality,
affordable universal coverage is neither achievable nor sustainable unless
we transform the delivery model. Health delivery systems need an
independent but transparent regulatory process to achieve productivity and
innovation. The CED plan is not Medicare for all, and it is not markets for
all," said Dr. Jerome Grossman, Senior Fellow, John F. Kennedy School of
Government and Director of the Harvard/Kennedy School Health Care Delivery
Policy Program. Dr. Grossman is a CED Trustee and co-chair of the CED
Health-Care Subcommittee that produced the report after two years of
research and discussion by CED's Trustees and health care experts.

"There are successful models for consumer choice of insurance plans,
including the federal employees plan," said Robert Chess, Chairman Nektar
Therapeutics. Mr. Chess is also a CED Trustee and co-chair of the CED
Health-Care Subcommittee. "The CED proposal builds on the best of those
ideas and adds some new ones to achieve affordable, sustainable, quality
coverage for all Americans."

Key Findings of Quality, Affordable Health Care for All:

-- The U.S. employer-based health insurance system is failing. The cost
of insurance is rising unsustainably - faster than wages. More employers
are dropping or curtailing coverage than expanding coverage. U.S.
businesses' insurance costs make them less competitive globally and depress
cash wages. The quality of care is unacceptably low. Authoritative studies
document numerous prescription and treatment errors that cause unnecessary
suffering, illness, injury and cost. Patients get only an estimated 55
percent of necessary and appropriate care. And access to care is
deteriorating: 47 million Americans lack health insurance, and that number
is rising.

-- The root causes of these problems lie deep within the structure of
our health-care system. No one currently has an incentive to seek, or
provide, quality, cost-efficient health care; our employer-based health
insurance system lacks meaningful competition. Without controlling costs,
we will never achieve affordable universal coverage.

Employees usually have no choice. Insurers demand all of an employer's
business - to reduce per-employee overhead costs and avoid enrolling only
the sickest workers. So employees have no choice of a plan (if they are
offered health care at all). But employees, understandably, want to choose
their doctors. Thus, to satisfy both employees and insurers, employers can
offer only one plan that provides access to most doctors. The only way to
reimburse any doctor an employee might choose is on a fee-for-service basis
- a system with the worst incentives to drive up costs: the more services,
the more fees.

Recommendations

-- The nation must replace employer-provided health insurance. Past
employer efforts to provide affordable, quality health benefits have
failed. The market is flawed, leaving those most in need without coverage
and driving costs ever higher. A government-run, command-and-control system
will not succeed; and devolving complex medical decisions from doctors to
patients will not yield affordable care either. Instead, we must
restructure the health-insurance market (and through it the health-delivery
system) so that all Americans can afford and obtain quality coverage when
the incentives for employers, employees, and providers all encourage
quality, affordable care.

-- Individuals, not employers, must have choices among insurance
options that meet their needs; no one should be forced into any one plan.
People should be able to keep their coverage when they change employers.
And importantly, people should be able to realize the savings - dollar for
dollar - if they choose a less-costly plan, using clear information on
quality and cost. This new competition would drive providers to minimize
costs and improve quality.

The nation can establish such a market for quality, affordable
universal health care through two key steps:

-- First, the federal government should establish independent regional
"exchanges" as points of entry for people to choose among competing private
health-care plans. This system improves on the Federal Employees Health
Benefits Plan, which also covers members of Congress. Everyone would be
guaranteed any one of a range of private insurance plans. The plans could
not charge more based on age or preexisting conditions (unlike the current
individual insurance market). System standards would ensure quality and
comprehensive coverage and protect consumers through standardized "fine
print." Plan comparisons and an annual open season would help people to
change plans - introducing competition into the health marketplace. Each
exchange would "risk-adjust" premium revenue to insurers - paying more to
insurers that cover more people with expensive conditions - to give
insurers a greater incentive to cover, rather than shun, sick people. The
exchanges would be supervised by a "Health Fed," modeled on the
independence and structure of the Federal Reserve.

-- Next, every household would receive a fixed-dollar credit sufficient
to purchase the low-priced quality health plan in its region. Every
individual, therefore, could buy quality health insurance at no
out-of-pocket cost. Anyone could purchase a more-expensive plan by paying
only the extra cost. People could keep the kind of health insurance and
doctor that they now have and prefer. Such fixed-dollar contributions have
been successful for employees of Hewlett Packard, Wells Fargo, the
University of California, Stanford University, and the states of
Washington, Wisconsin, and California. The fixed-dollar credit would be
financed by eliminating the current tax exclusion for employer-paid
insurance, and by broadly based tax revenues, for example a payroll,
value-added, or environmental tax. Every individual would in effect
contribute toward the health-insurance program, so every individual would
be entitled to insurance - without costly "mandates" or means-testing.

With every individual assured of quality coverage, and able to save by
choosing a low-priced plan, insurers and providers would then have a new
incentive to offer quality, affordable care that people - not their
employers - want. There would be competition in the health marketplace,
driven by fair rules to reward quality and cost-effectiveness, rather than
denying care and selecting risks. Rules-based competition has driven
progress in every other industry in our economy and around the world, and
competition has the greatest promise to move health care from its current
path of unsustainable cost growth, mediocre quality, deteriorating health,
and declining coverage.

"This approach provides the working-age population and their dependents
with quality, affordable health coverage. Expanded coverage minus cost
control is unaffordable. Cost control absent a health-care market with
effective competition is unacceptable. We hope that this plan will
stimulate constructive debate and ultimately lead to a market-based system
that focuses on the standards for effective competition where both
government and the private sector can play their most productive roles,"
said Charles Kolb, CED President.

Quality, Affordable Health Care for All is available at http://www.ced.org CED
is a non-profit, non-partisan organization of more than 200 business
leaders and university presidents. Since 1942, its research and policy
programs have addressed many pressing economic and social issues, including
education reform, workforce competitiveness, campaign finance, health care,
and global trade and finance. CED promotes policies to produce increased
productivity and living standards, greater and more equal opportunity for
every citizen, and an improved quality of life for all.

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